Review of the year: The European Union

When the novice Polish premier, Kazimierz Marcinkiewicz, headed down the wrong corridor at an EU summit this month and marched in error towards the press area, one wisecracking TV reporter called out: "Has Poland lost its way?" A similar question could have been addressed to the leaders of all EU countries. For the bloc as a whole, 2005 has been an annus horribilis.

Enlarged to 25 nations, the EU had banked on 12 months of steady progress towards the adoption of a constitution for a bolder, bigger Europe. Instead, referendum "no" votes in France and the Netherlands put the project on ice as the EU became bogged down in a six-month feud over its future spending plans.

Despite signs of mild recovery in mainland Europe, economic growth overall remained sluggish, consensus on structural reform elusive. The EU indulged in a fractious internal battle over how much ground to give on farm subsidies in world trade negotiations. Only a last-minute, hard-fought, deal over the EU budget for 2007-13 averted the prospect of paralysis.

The fate of the EU in 2005 was intertwined with the fortunes of its national leaders and, in particular, with the war of attrition between the French president, Jacques Chirac, and Tony Blair. Chirac was bounced into holding a referendum on the constitution because Blair had promised one in the UK. The outcome was a strong rejection of a discredited president.

If that left any lingering doubt, the constitution was killed by a referendum in the Netherlands. Such was the momentum against the document that, thereafter, only one country - Luxembourg - dared to stage a plebiscite on the constitution in 2005. Even in the Europhile Grand Duchy, only 56 per cent voted in favour.

With the fate of the document too difficult to contemplate, EU heads of government put it on hold. But that proved just the prelude to the row that was to dominate the rest of the year over EU finance.

Again, Chirac set the tone with a pre-emptive strike against Blair demanding a surrender of the British budget rebate. Blair responded with a counter-demand for reform of the EU's Common Agricultural Policy, something that was impossible in the short term because Blair had already agreed EU agriculture spending up to 2013. The scene was set for a spectacular fall-out, which left Blair with just a couple of allies in blocking a deal in June.

It took another six months to escape from that cul-de-sac. In the meantime, the EU recorded some progress, opening historic membership negotiations with Turkey. It also launched monitoring missions as far afield as Aceh in Indonesia and Rafah in the Palestinian Territories.

There were deals under the UK presidency of the EU on reform of the sugar market subsidies and anti-terror measures over data retention, and a new law to test chemicals. José Manuel Barroso, president of the European Commission, launched a plan to repeal unnecessary EU legislation and laid out a strategy for dealing with globalisation.

But most of the time Europe's leaders refused, resolutely, to see the big picture. The decision to start EU membership talks with Turkey was achieved only amid fierce opposition, led by Austria and supported by key French politicians. Paris campaigned openly against the Britain's EU Trade Commissioner, Peter Mandelson.

Cross-Channel relations were typified by Chirac's jibe that "one cannot trust people whose cuisine is so bad". Perhaps in revenge, Blair served his fellow leaders white wine from Wales and red from Devon when he hosted the December EU summit. The endless Anglo-French rivalry was given an unexpected twist when London, not Paris, won the 2012 Olympics in July.

Europe suffered a crippling lack of leadership. His opinion poll rating slumping, Chirac's authority was diminished further by his spell in hospital after a "vascular" incident that prompted a war of succession at home. Then came the riots in his country's depressed suburbs.

Despite his election victory in May, Blair returned to power weakened by his reduced majority. In the EU, the allies whom Blair courted in eastern Europe were horrified, first by his blocking of the budget in June, then by his proposed cuts to their subsidies.

In Italy, Silvio Berlusconi's weakened government, never a real force in Europe, was distracted by domestic crisis and the prospect of elections in April 2006. Poland, meanwhile, elected a minority government committed to populist policies rather than economic reform.

In Germany, Gerhard Schröder's seven-year Chancellorship came to an end. His down-to-earth successor, Angela Merkel, lost a big pre-election poll lead and had to struggle to form a coalition. But it was Merkel who helped rescue the December EU summit on Europe's next budget, playing the honest broker between Blair and Chirac. Suggesting the final compromise, with an increase in spending on Blair's plan, cost Germany slightly more. But Merkel won friends and positioned herself as the decisive force in the EU's diminished clubs of leaders.